Although the economies of Africa & the Middle East — a region in which we include Africa, the Gulf, Iran, Turkey and the Levant — will not be affected by the global economic crisis as severely as the economies of developed markets, the EIU is still forecasting a 6% decline in regional GDP from 2008 to 2009. A few years from now, the economic picture will become much brighter: We expect the region’s GDP to make a fast recovery from 2010 onward, with growth outpacing every other region except for Central & Eastern Europe. But how will the downturn affect Capex spending in Africa & the Middle East (AME) in the meantime? We believe there are reasonable grounds for optimism. Q1 2009 reports from equipment and network vendors are showing an overall decline in global sales, but spending in AME is holding steady so far. Indeed, AME is one of only two regions that will actually see an increase in total telecom revenue in 2009 (see Exhibit 1), and we forecast a similar resilience in its Capex spending. Because operators in AME need to make a variety of immediate and unavoidable network improvements — to cope with a rapidly expanding mobile subscriber base, to respond to the increasing demand for wireless broadband and to comply with the terms of new licenses, privatizations and acquisition agreements — we expect that the economic turmoil of 2009 and 2010 will not cause a downturn in AME’s Capex investments.
This report analyzes the three major factors that will drive Capex investment in AME during 2009 and 2010 and investigates how the global economic downturn will affect each one. It then looks in more detail at three operators in key markets (Turkcell in Turkey, Vodafone in Ghana and Zain in Nigeria) that serve as real-life illustrations of the prevalent trend among AME operators to keep spending on network infrastructure.
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